There has been no change in the interest rates of Small Savings Scheme for almost two years i.e. 8 quarters. The new tax regime has filled the remaining gap. In which no provision was made for any kind of relief on tax on investing in small saving schemes. Everyone felt that these schemes would now be marginalized. After which they will be eliminated.
This did not happen even though the government has abolished the exemption on these schemes, but how will the habit of investing or saving of common people be abolished? Despite all these things, the middle class of the country continued to have faith in the schemes like Small Savings Scheme i.e. PPF, NSC and Sukanya and they invested more than Rs 2 lakh crore. Let us also tell you what kind of report has come out.
The ET report quoted people familiar with the matter as saying that till January 10, a collection of Rs 2.17 lakh crore was made under the National Small Savings Fund, which is about two-thirds of the Budget Estimate (BE) for the current financial year. Since a large portion of such deposits usually come in the March quarter due to the year-end rush for tax saving schemes, officials expect the total collection for 2025-26 to exceed the primary target.
The over-budget investment in small savings schemes, including the Public Provident Fund and Sukanya Samriddhi Yojana, has provided additional relief to the central government and reduced its need to borrow from the market. The Center has budgeted Rs 3.43 lakh crore for 2025-26 from NSSF to meet a part of the fiscal deficit, which is less than Rs 4.12 lakh crore (revised estimate) for FY 2025. It aims to limit its fiscal deficit to Rs 15.69 lakh crore or 4.4 per cent of GDP in 2025-26, which was 4.8 per cent a year ago.
The reduction in NSSF (National Savings Fund) prescribed in the budget has been made keeping in mind the possibility of a large number of taxpayers switching to the new tax regime. This system was made more attractive by increasing the tax relief in the last budget. In the new system, tax incentives are given on small savings schemes, whereas under the old system, tax deduction is applicable on deposits up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act.
Officials said that despite about 75 percent of taxpayers shifting to the new tax regime, a good amount of deposits are coming in small savings schemes. This is because the new interest rates are more attractive than some other similar investment options. The government has reduced its 2025-26 target of gross market lending through debt securities to Rs 14.72 lakh crore from Rs 14.82 lakh crore set in the budget.
Till March, the interest rates of a dozen small savings schemes have been kept unchanged for the eighth consecutive quarter. This is when the central bank has cut the benchmark lending rate by 125 basis points in the last one year, putting pressure on bank deposit rates. Changes in interest rates on small savings schemes are generally determined keeping in mind the expected returns on government securities of similar tenure, which have started declining in recent quarters.
Interest rates on deposits in PPF and Sukanya Samriddhi accounts are 7.1% and 8.2% respectively in the current quarter. Senior Citizens Saving Scheme (8.2%) National Saving Scheme (7.7%), Kisan Vikas Patra (7.5% on maturity in 115 months), Savings Account (4%), One Year FD (6.9%), Two Year FD (7%), Three Year FD (7.1%), Five Year FD (7.5%), Five Year RD (6.7%) and Monthly Income Saving Scheme (7.4%) The rates also remain unchanged.
